Section 9 of Payment of Gratuity Act 1972 - Penalties

Section 9 of the former Payment of Gratuity Act, 1972 prescribed criminal penalties for knowingly making false statements to avoid gratuity liability, contravention of the Act, and failure to pay gratuity.

Current legal position: The relevant provisions of the Code on Social Security, 2020 have been brought into force, and the former Payment of Gratuity Act, 1972 stands repealed under Section 164 of the Code, subject to applicable savings. Current offences and penalties are consolidated in Chapter XII of the Code, particularly Sections 133 to 138. Failure to pay gratuity is specifically an offence under Section 133(g).

Text of former Section 9 - Penalties

9. (1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees or with both.

(2) An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made thereunder shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both:

Provided that where the offence relates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to two years unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.

What former Section 9 covered

False statement or representationA knowing false statement made to avoid gratuity payment, or to enable another person to avoid payment, was punishable under sub-section (1).
General employer defaultContravention of the Act, rules or orders attracted the punishment specified in sub-section (2).
Non-payment of gratuityThe former Act prescribed a more specific imprisonment provision where the offence related to non-payment of gratuity.
Court's recorded reasonsThe former proviso permitted a lesser imprisonment term or fine where the trial court recorded reasons that such punishment would meet the ends of justice.

Current law - Section 133 of Code on Social Security 2020

Section 133 - Penalty for failure to pay contributions, etc. This provision identifies multiple offences under the Code. For gratuity, Section 133(g) applies where a person fails to pay any amount of gratuity to which an employee is entitled under the Code.

Under the punishment provision attached to clause (g), failure to pay gratuity is punishable with imprisonment for a term which may extend to one year, or with fine which may extend to fifty thousand rupees, or with both.

Section 133 also separately addresses matters such as obstruction of an Inspector-cum-Facilitator, failure to produce required records, failure to submit information, dishonest false returns or statements, and other specified defaults. The exact clause and punishment depend on the nature of the contravention.

Enhanced punishment for repeat offence - Section 134

Section 134 provides enhanced punishment where a person already convicted of an offence under the Code commits the same offence again. For a second or subsequent offence involving failure by an employer to pay gratuity or certain other statutory dues or benefits, the provision prescribes imprisonment which may extend to three years but shall not be less than two years, together with a fine of three lakh rupees.

Offences by companies - Section 135

Section 135 deals with offences committed by a company. It may extend liability to the company and persons who were directly in charge of and responsible for its business when the offence was committed, subject to the statutory defence. It also addresses offences committed with the consent or connivance of, or attributable to neglect by, specified company officers.

Cognizance and prosecution - Section 136

Section 136 regulates cognizance of offences under the Code, including who may make the complaint and the court competent to try offences. Prosecution therefore depends not only on the alleged default but also on compliance with the statutory cognizance procedure.

Compounding and prior opportunity - Sections 137 and 138

  • Section 137: provides for compounding of specified offences, subject to the conditions and exclusions contained in the Code.
  • Section 138: contains a prior-opportunity mechanism for certain offences before prosecution is initiated, subject to its statutory conditions and exceptions.
  • Penalty provisions must be read together: the applicable offence clause, punishment, repeat-offence rule, company liability, cognizance, compounding and prosecution procedure should be considered together in a current case.

Former Section 9 and current Code

The former Section 9 should continue to be read for historical cases and proceedings preserved by applicable repeal and saving provisions. For current gratuity defaults governed by the Code on Social Security, 2020, the offence and penalty provisions in Chapter XII apply. The current Code should therefore be consulted before relying on the imprisonment and fine amounts appearing in the historical Section 9 text.

Official legal resources

Ministry of Labour and Employment - Code on Social Security 2020

Official Code on Social Security 2020 PDF

Ministry of Labour and Employment - Labour Codes and Rules

Ministry of Labour and Employment - Payment of Gratuity Act Archive

Ministry of Labour and Employment - Official Portal